In addition to the annual exclusion gift there are two types of unlimited gifts. These will not count against the annual gift tax exclusion.
The first of these unlimited types of gifts would be any payments that qualify for the educational exclusion. But what sort of payments qualify for the educational exclusion?
These would be any payments made directly to a qualifying domestic or foreign institution as tuition. And must be for the education of the individual.
For example, you could pay for a grandchild's tuition for the year, but also give them the annual exclusion gift of $13,000 without any federal tax consequences.
But it is important to note that the payment for tuition must be made directly to the college or university that is providing the education. And this payment cannot be for books, lodging, computers, or other types of educational supplies. Otherwise, the payment will become a taxable gift.
Consult with your estate litigation attorney on how you can use the educational gift exclusion to benefit your loved ones and your estate.
*This blog entry was not written by an Attorney and should not be constituted as professional legal advice.